Daily MAAD rallied to another short to intermediate-term high Tuesday and its best level since March 2009. Thirteen issues were positive and 6 were negative. One was unchanged. Daily MAAD Ratio was “Overbought” at 2.21.

Call/Put Dollar Value Flow Line (CPFL) rallied to another short to intermediate high Tuesday and CPFL Ratio moved higher into “Overbought” territory at 2.21.

Cumulative Volume (CV) hit new highs in S&P 500, S&P Emini, Dow 30, and NASDAQ Composite to underscore positive flavor of uptrend. Relative to pricing, however, CV has been less enthusiastic than price action since April 18 short-term lows.

Market Overview – What We Think:

New highs in face of “Overbought” conditions on all cycles simply underscore power of trend.

Nonetheless, market has begun to look “spikey” on upside to suggest staying power of Minor Cycle positive could be limited.

Interestingly, despite new highs in index pricing our Minor Cycle volatility measurements based on VIX data have not hit new lows. Since pricing and volatility operate inversely, current short-term strength could prove to be “blow-off” and final phase of Intermediate Cycle begun last November 16. Current variance between price and volatility is first since Intermediate Cycle rally began nearly six months ago.

How Minor Cycle plays out will determine staying power of larger Intermediate Cycle that has been underway since November 16. So long as that Intermediate Cycle positive remains intact, all near-term pullbacks must be regarded as merely corrective.

Index

Price Channel Stops (10-Bar MAs of Highs/Lows )

Weekly

Monthly

5/13

5/14

5/15

5/16

5/17

5/17

5/31

S&P 500 Index

SELL1589.88

SELL1595.82

SELL1601.89

SELL1607.17

SELL1611.75

SELL1532.39

SELL1360.47

Dow Jones Industrials

SELL14761.90

SELL14807.54

SELL14855.27

SELL14901.09

SELL14938.39

SELL14280.35

SELL12701.94

NASDAQ Composite

SELL3319.46

SELL3334.44

SELL3348.48

SELL3362.55

SELL3375.85

SELL3183.98

SELL2896.99

Value Line Index

SELL3555.02

SELL3571.40

SELL3588.37

SELL3604.54

SELL3619.32

SELL3442.43

SELL2895.29

Note: Stop levels, a function of the extant trend, are based on the trailing moving average price channels for the Highs or the Lows of an index. Whether or not a specific index is suggesting a “Buy” or Sell” is determined by whether or not index prices are above or below the current channel Stop levels. Stop levels should only be used as an entry or exit guide and in conjunction with other market entry and exit strategies.